Image © European Central Bank
The EUR/USD exchange rate has settled this week to quote at 1.1237 on Friday. Analyst and technical forecaster Richard Perry of Hantec Markets says this is a market searching for direction.
Another small bodied daily candlestick suggests that it is still too early for the bulls to get excited on EUR/USD.
The payrolls report eventually weighed on the pair, and once more it left a candlestick with a lot of bluster (long shadows) but little real conviction (small difference between open and close).
Subsequently, as the dust settles we continue to see EUR/USD ranging. With today being a US public holiday, this outlook is unlikely to change much coming into the weekend (aside from perhaps some initial chop around the Eurozone PMIs).
Taking a step back, the euro continues to find buyers around the range lows between $1.1165 and $1.1200 area.
However, for the past few weeks now, the weight of sellers bears down on the market between $1.1300/$1.1350.
Momentum indicators are flattening off, with the daily RSI still holding firm above 50, whilst Stochastics have also lost their negative impetus.
There have now been five closing candles in a row which have lacked conviction, so this is a market looking for direction.
In isolation, the US economy adding +4.8m jobs (which is a record number) sounds incredible. However, this comes amidst the backdrop of employment levels still being around -15m jobs lower than it was back in February.
This “positive” data came on a day where record numbers of COVID-19 infections were reported (around 54,000) and where weekly jobless numbers continues to come in higher than expected.
With 12 states pulling back from their re-opening procedures, there is a real concern than July could now be a month were the positive data of June is undone.
So, the risk positive reaction of the payrolls report yesterday may not last long. Treasury yields ended the day lower and although Wall Street closed higher, it was way below session highs.
The perception could be that the good news of the recovery may now be past its peak, or at least for this phase of the recovery.
The US is on public holiday for Independence Day today, we will begin to get a clearer picture of the broad outlook of this next week.
Today could be a bit of a non-event, but focus will be on services PMIs.
A bounce to 45.0 in Japan does not shoot the lights out, but China Caixin Services PMI at 58.4 is a positive and has allowed European equities to come in with a marginal positive bias. Final Eurozone and UK PMIs could give more of a steer to the session, but we do not anticipate too much action today.